Earlier this week, the Pensions Regulator confirmed that the number of people opting into the Government’s new auto-enrolment system has hit the million mark.
The Government introduced auto-enrolment last October to ensure that all employees have access to an occupational pension scheme, in a bid to reverse decades of decline in pension contributions.
Under the scheme, all but the smallest firms must offer their employees a pension, to which the employer will add a contribution. Auto-enrolment is being rolled out to all employers over the next five years, starting with the largest organisations.
Employees may opt out of the scheme but because they are being enrolled by default, 90 per cent are sticking with their pension and a 10 per cent opt-out rate is much lower than the 30 per cent forecast.
At the moment, the minimum contribution an employer can give is 1 per cent, matching the same contribution from an employee, but this is being phased in incrementally, so that by 2018, the minimum contribution goes up to eight per cent, with at least three per cent from the employer
Pensions Minister Steve Webb said that hitting the million was a real landmark in “this quiet revolution” and added that many people will now be able to put money aside for their retirement, often for the first time.
However, according to the Pensions Regulator, approximately 11 million people are still not saving enough to achieve the pension income they want or need for retirement, and in the meantime, life expectancy continues to rise.
There are also concerns that smaller firms are not doing enough to make sure they get the proper advice on implementation of auto-enrolment when their times comes.